Social Dimensions of Entrepreneurship. - People. hbs .edu ...

embed themselves in high school networks of elites. Just as for the
Maghribi traders, Koreans share a collectivist culture based on shared identity and
historical experience. While culture no doubt helps to facilitate resource sharing,
culture is aided by ongoing firm-specific investments in network development and
governance. These networks often take on the role of prosecutor, judge and jury in
Korean society. Formal courts are costly and slow in operation. Members of the
same network monitor each other and share information on each other’s behavior with
other members. When one member is alleged to cheat on one another, ongoing
norms of community enforcement help to spread news of the transgression and to
build legitimacy for a joint punishment. Only those who have most strongly
embedded themselves in the network structure, and who have gone on to obey the
social norms of conduct within the network, enjoy the largest benefits in terms of
receiving large-scale investment from network members.
The concept of reputational bonding follows a long line of studies in the
entrepreneurship literature on the ‘network success’ hypothesis. The seminal study
in this tradition was that of Aldrich and Zimmer (1986), who noted that entrepreneurs
are highly social actors who actively embed themselves in a social context. During
the past decade, it has become an accepted theory in the global entrepreneurship
literature that ‘those entrepreneurs who can refer to a broad and diverse social
network and who receive much support from their network are more successful
(network success hypothesis)’ (Brüderal and Preisendörfer 1998).
Reputational bonding is not just a successful strategy for firms in countries
with weak legal institutions: it is also an essential strategy for firms in advanced
knowledge-driven industries around the world where the rules of competition are in
play, the value of an inventor's new technology is uncertain to outside investors and
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